Tesla CEO Elon Musk on Wednesday left open the possibility of merging the electric vehicle maker with his other company, SpaceX, which is valued at over a trillion dollars, declining to rule it out and citing the overlap in the companies' areas of operation, UNN reports, citing Reuters.
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"As seen by numerous collaborations with SpaceX on many fronts, the overlap is increasing more and more," Musk said on a Tesla earnings call.
"We can't talk about merging companies and things like that on an earnings call," he added. "That would have to be done through the proper process."
Investors and analysts have long speculated about the possibility of merging Musk's electric vehicle and space companies, and those discussions intensified during SpaceX's record $75 billion initial public offering.
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After Musk's comments, he turned to Tesla General Counsel Brandon Ehrhart, who stuck to standard language, calling SpaceX an "excellent partner" that provides "numerous beneficial transactions."
Gene Munster, managing partner of investment firm Tesla Deepwater Asset Management, said the conversation further convinced him that the companies are destined to merge within the next few years.
"Today I would put the probability of these two companies merging at 90%," he said in a video posted on social media. "If you had asked me yesterday, I would have said it was 80%."
Tesla already supplies batteries and manufacturing technology for some SpaceX projects, and the companies are jointly developing Terafab, a semiconductor manufacturing facility designed to produce chips for artificial intelligence.
Proponents argue that a merger could streamline Musk's corporate empire and create a more integrated company spanning artificial intelligence, robotics, manufacturing, energy, and space infrastructure.
JPMorgan analysts said this month that "operational integration between the two entities is already deep," citing shared engineering talent, AI infrastructure, Terafab, and Musk's leadership as factors that "would facilitate a potential merger."
Stifel analysts were even more optimistic, writing that "many investors consider it inevitable that Musk will merge SpaceX with Tesla — for them, the question is not if it will happen, but when it will happen."
SpaceX President and Chief Operating Officer Gwynne Shotwell also acknowledged potential benefits, saying in a June interview with CNBC that a merger "might make life a little easier for Elon" by streamlining management across all his divisions.
However, others warn that any deal could face serious hurdles. In the same JPMorgan research note, the bank pointed to a "practical bottleneck" in obtaining regulatory approvals for both companies, particularly in China, where national security concerns related to SpaceX's ties to the U.S. government could create problems.
Analysts also note that Musk controls a much larger voting stake in SpaceX than in Tesla, complicating corporate governance issues for Tesla's public shareholders.